Tax panel proposes collections upgrade

Proposal seen as aid to pursue fraud, debt

BOISE – Idaho needs to invest $5.2 million for a major computer upgrade in its tax collection system, state tax officials say, and it’ll pay off big not far down the road.

The upgrade, which state tax commissioners plan to pitch to lawmakers in January, could pay for itself within its first full year of operation, officials estimate, by allowing the state to better pursue fraudulent returns and tax lien debt.

The proposal comes as the state’s four-member Tax Commission has been working to boost public confidence and employee morale, two years after a former director resigned amid scandal and charges that the commission was cutting secret deals with influential taxpayers. Current Chairman David Langhorst, a Democrat, said the commission is working toward “a more open and transparent way of doing business, and better communication within our own ranks.”

A longtime state tax auditor filed a 17-page whistle-blower report in 2008, and in 2009 the Legislature unanimously passed a new law to end the practice of a single tax commissioner approving secret deals to excuse all or part of taxes owed. That law required at least two commissioners to sign off on settlements over $50,000, though the whistle-blower, Stan Howland, said it didn’t fix the problems.

Langhorst said the commission has far exceeded that law’s requirements. “We assure that all four commissioners sign off on every decision and every settlement, regardless of size – even if they’re $50,” he said.

Plus, he said, “We engage the audit staff more – we encourage discussion between policy people and our auditors.”

Commissioner Tom Katsilometes said it also assures the commission’s auditors “that they know that we’re looking at these cases seriously and in-depth – we’re not just arbitrarily deciding them. … We’re not bypassing their work.”

A 2010 lawsuit filed by Rep. Shirley Ringo, D-Moscow, charged that influential taxpayers were getting reductions in their taxes over auditors’ protests and that confidentiality rules were being used to keep the deals secret. The lawsuit was dropped in 2011, after then-Tax Commission Chairman Royce Chigbrow resigned.

In connection with the lawsuit, numerous whistle-blowers stepped forward with allegations similar to Howland’s.

Langhorst, speaking at the commission’s annual meeting Tuesday, said things have improved since then. Over the past three years, a compliance initiative that added auditors allowed the commission to collect $52 million in taxes that were owed but weren’t being collected.

The computer upgrade could boost that, officials say.

“The problem is that our software is based on 10-year-old technology,” said Doreen Warren, revenue and operations division administrator.

While fully replacing the system used for processing 2.3 million tax returns, payments and other transactions a year would cost $25 million, the upgrade the commission is proposing would cost $5.2 million and in its first year of full operation could bring in between $2.6 million and $6 million in additional collections.

Warren said if the computer system, known as GenTax, isn’t modernized, it will become increasingly difficult to maintain and could hamper tax collection efforts in the future.

The request for funding will go to lawmakers and Gov. Butch Otter for possible inclusion in the fiscal year 2014 state budget, which will be set in the legislative session that convenes in January. The new system would take 18 months to reach full operation.